12/19/2024
Palliser Capital Announces Submission of Resolution to Rio Tinto Calling for Independent Review on Unifying Dual Listing
Business Wire (12/19/24)
Palliser Capital, an investor with a significant interest in Rio Tinto (RIO), and over 100 other shareholders requisitioned a resolution for the company’s next annual general meeting (AGM) of shareholders calling for an independent, comprehensive, and transparent review on the merits of unifying Rio Tinto’s current dual listed company (DLC) structure into a single Australian-domiciled holding company with a primary listing on the ASX and ongoing LSE and NYSE (ADR) listings. Palliser explained in a letter to the Rio Tinto Board of Directors that the resolution has been put forward to provide all shareholders with access to independently sourced information and ensure a robust review on whether Rio Tinto should keep its current ownership structure, which has already contributed to an estimated c.$50 billion in value destruction since 1995, or embrace unification, thus unlocking a path to $28 billion in near-term upside for PLC shareholders and setting the Company on a trajectory for sustainable growth. The letter states, "We sent our letter to the Board after over 6 months of good faith effort on our part to engage with management on the multiple significant benefits of unification. That included numerous requests to meet with Mr. Stausholm, which finally happened on 4 December 2024. Despite us demonstrating the overwhelming empirical evidence in favor of unification, management has remained adamant that there is no value case for this step whatsoever. When the directors of almost every other DLC, together with independent experts, have consistently set out the clear and compelling reasons for an unwind – as the plethora of statements from them at Appendix 1 demonstrate – we believe that the global 'value-case' for unification is conclusive. In our view, it is, in fact, incumbent on management to now fully and transparently justify to the investor community exactly why Rio Tinto is immune from all of the globally-accepted inefficiencies of a DLC structure. In short, so persuasive is the evidence in favor of unification that it is incumbent on management to explain why unifying Rio Tinto’s DLC would fail to unlock the universally agreed-upon significant advantages of a simplified structure that so many have cited and benefited from. In our 4 December letter, we asked the Board to commission a comprehensive review which would look into these exact issues. However, despite our request for a reply by 18 December 2024, we are yet to receive any substantive feedback in this regard." The letter continues, "At this juncture, we have every reason to doubt Rio Tinto’s commitment to treating the topic of unification with the importance it deserves. Management’s superficial review is simply not good enough and we are worried that the Board will not take appropriate steps to rectify its shortcomings. Management have told us that investors are not concerned about whether to unwind Rio Tinto’s structure and that it is mainly Palliser raising the question. However, since our letter and presentation of 4 December, we have received an outpour of support from a diverse range of stakeholders and buy-side and sell-side analysts – across Australia and the United Kingdom – all of whom have expressed overwhelming support for the rationale to unify that we put forward. For these reasons, we are now compelled to take action – to exercise our rights as shareholders – to ensure that the Board steps up for all those investors who agree with our perspectives. Accordingly, Palliser and more than 100 other shareholders have today requisitioned a resolution be moved at the next AGM pursuant to s.338 of the Companies Act 2006. The resolution is simple – it directs the Board to conduct an independent, comprehensive and transparent review on whether unification of Rio Tinto’s DLC structure is in the best interests of Rio Tinto’s shareholders and to share the detailed findings of that review with the market. Palliser did not take this step lightly or without a great deal of deliberation. We took this step because we believe that the market is long-overdue the review we are requesting and, if the Board is not willing to procure it of its own accord, then we must ensure that shareholders have the ability to require them to do so. The resolution we have co-filed provides an opportunity for shareholders of Rio Tinto to be heard. It enables management to genuinely test whether shareholder support for unification is 'impossible,' as they have asserted. It allows the pressing questions around the unwind of the current ownership structure to take its place on the AGM agenda, alongside all of the other matters of critical importance to shareholders." The letter concludes, "It should not take investor pressure for management to do the right thing – to resolve the value destructive inefficiencies of their outdated structure and set Rio Tinto on the trajectory of long-term value enhancement. In the words of your chairman, Mr. Dominic Barton, 'It should not take an activist hedge fund attack to prompt executives to lay out their strategy for long-term value creation.' The directors of former DLCs have been perfectly clear that unification is an essential and critical step to future-proof their businesses – to accelerate shareholder returns, enable meaningful portfolio evolution and catalyze their ability to compete effectively with their DLC-free peers. The members of the Board must also look to the future of Rio Tinto. At a time when there is fierce competition in the mining industry to diversify and secure future facing commodities critical to the energy transition, Rio Tinto cannot afford to be hampered by a clunky and inefficient structure that removes all important equity currency from the negotiation table in M&A transactions. It is simply unsustainable for the Board of the second largest mining company in the world to keep working around the value-destructive constraints of its archaic structure, while its DLC-free peers optimize value through their unrestricted access to the full suite of capital allocation tools. Accordingly, the resolution we and our co-filers have put forward today ensures the topic will finally be given the focus and attention it requires, without further delay. As BHP’s chairman put it, 'Unifying BHP’s corporate structure today is about setting BHP and its Shareholders up for tomorrow.' It is about time Rio Tinto and its shareholders are set up for tomorrow too."
Read the article